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Sunday, 26 May 2013

Emirates, Etihad, Qatar: The Steady Rise of Persian Gulf Airlines

Every
passing day, it becomes more evident that Persian Gulf airlines like Emirates
Airlines, Etihad Airways and Qatar Airways are slowly taking over from
traditional European carriers like British Airways, Lufthansa, Air France and
KLM as the dominant forces in the international travel industry. Where
London, Paris and Frankfurt were the traditional change-hubs in the past, today
Dubai, Doha and Abu Dhabi are taking over. The inroads made by the Gulf
carriers has forced the likes of British Airways and Iberia on the one hand and
Air France and KLM on the other to merge and consolidate, seeking to cut costs
rather than struggle on alone.

Strategic
investments by co-operative governments have given Emirates, Etihad and Qatar
large fleets and huge airports. They have created a flourishing environment
while established carriers languish. The point here is that the Gulf carriers
are in the driving seat. They have the planes, the hubs, the connections and
are opening up the new markets. While Europe is worried about expanding
their old airports, airlines in Gulf region are building whole global
interchanges.

Over
the past year alone, the Gulf airlines have expanded their investments and
routes across the world. Etihad commenced operations in Nigeria July last year,
thus offering strong competition to its fellow Middle-eastern carriers (and the
traditional superpowers) in one of Africa’s most lucrative routes. But it is
not only in emerging markets that they are expanding.

The
same Etiihad, two months ago, announced that it is splurging $70m to secure
three Heathrow airport slots at about the same time British Airways saw its
profits wiped out. The news so far this month has not been different but
rather supports the projection that the traditional carriers need to evolve or
risk being run out of business in the not-too-distant future.

Increasing Profits

In
an industry that has already made a multi-billion-dollar global loss in seven
of the last 12 years, with European airlines recording losses of around $1bn
last year, Emirates - three weeks ago – announced a 52% jump in
profits. The Dubai-based airline’s fast growth outpaced rising fuel costs as it
posted $622 million in net profit in the 2012-2013 fiscal year.

According to
analysts, the fact that Emirates isn’t simply spending its way to growth but
raking in the dollars too should make its rivals in Europe even more worried
than they already are.

Etihad – which was
established less than a decade ago – announced that passenger numbers had
passed 10 million a year and it was turning increasing profits. Emirates, the
UAE’s biggest airline, in February completed the opening of an entire 20-gate
concourse at its Dubai airport base purely for its fleet of giant A380s,
Airbus’s flagship aircraft, which typically carry 500-plus passengers.
And in Qatar, a new $15.5bn airport has opened with a runway fit for fleets of
A380s. Qatar’s airport will be able to handle 28 million passengers a year
after opening, but chief executive Akbar al-Baker is planning extension for 50
million by 2022, when the state hosts the football World Cup.

Better Services

The
Middle Eastern airlines have found a way to distinguish themselves through
quality of service. Qatar –which has won two consecutive Airline of the Year
Awards, usually boasts in advertisements that it is the world’s only five-star
airline. Etihad recently raised the bar by launching premium services for
passengers that include bringing personal, on-board chefs into its first class
cabin, and installing in-flight showers on their aircraft.

Emirates also
offer in-flight hot shower facilities but are set to go further in creating a
richer flying experience for costumers. The airline plans to add signature
Shisha rooms to the list of things to do mid-flight. A Shisha is a traditional
water pipe, known to most as a hookah.

The
airline will allow passengers to pre-order their hookah/shisha before the
flight via the on-screen menu. Passengers go to the lounge to enjoy their
shisha experience after their meal. If the Shisha Room service trial goes well,
they will be added to the entire fleet of A380s by the end of the year.

Competitive
Pricing

Apart
from new planes and the increasing importance of the Middle-east as a global
hub, all three airlines are pushing the envelope when it comes to pricing. For
example, a random search for an economy class ticket on online travel portal
wakanow.com last week, to a location each in the western hemisphere (New York)
and the east (New Delhi), threw up interesting results.

Emirates offered
the cheapest fares, pricing below American carriers United and Delta as well as
Arik, even though the Nigerian Airline has the advantage of flying non-stop.
Etihad was not far behind in offering competitive rates either, while there was
no result for Qatar. Emirates fare was at least N100, 000 cheaper than any of
the aforementioned European carriers.

All
flights had one stopover though time spent connecting flights was not factored
in. This usually is a consideration when choosing a carrier to fly with.

For
the New Delhi route, the contrast in price disparity between the mid-east
airlines and the European carriers is starker. Here too, Qatar offered the
lowest price, which was less than half the price of a Lufthansa ticket and less
than a third of what a British Airways ticket costs. All flights required a
stopover.

Forging Stronger
Ties

The
possibility of a merger between any two of these airlines is not impossible.
Qatar Airways CEO Akbar Al Baker has said he is “always open” to the
possibility of an alliance with Emirates. “We are always open to an alliance
with Emirates Airline,” Al Baker said while on a visit to Dubai recently. “I
think now the closeness between Emirates and Qatar Airways will really make a
very strong airline.

Despite
the Doha-based airline announcing it is set to be fully integrated into the
Oneworld alliance from September, Al Baker pointed to Emirates’ recent alliance
with Australian rival Qantas as a clear example the Dubai airline was open to
integration.

“You never know.
Did you ever expect only one year ago that Emirates and Qantas would get
together? Things in aviation can move fast. Integration of Emirates and Qatar
Airways will benefit this region and will make the two airlines even stronger
than they are today.”

Last
year, Emirates’ President Tim Clark directly addressed Al Baker’s dream for a
merger with the two airlines and said it was unlikely to happen, as it would
have “seismic repercussions in the aero-political framework.

“You put the two
together and you would face the most formidable international airline group
that has ever been formed. That’s why it will never happen,” he was quoted as
saying by Aviation Week.

However, at the
launch of the Emirates-Qantas alliance, he seemed to be softening on the issue.
“We’ll act on any opportunity where we see the partnership adding value. We can
look at any partnership where the airlines’ chemistry matches, similar to the
deal signed with Qantas. Anything is possible,” Clark was quoted as saying by
Emirates 24/7.

Al
Baker said he was interested in an alliance with Emirates because the Dubai
carrier “is a very strongly established airline and have the network that would
absolutely compliment the network of Qatar Airways.”

“There is
certainly no rush - both Emirates and Qatar Airways are the world’s fastest
growing full service airlines.

They know that
whatever move they make, rivals will be shuddering with fear,” he said.